Lok Sabha elections 2019: Rahul Gandhi promises minimum income of Rs 72,000 a year to bottom 20 percentile

By: |
Published: March 26, 2019 5:46:40 AM

Gandhi announced the scheme after discussing it at the Congress Working Committee, which had met at the AICC headquarters here to give final shape to the party’s manifesto.

Gandhi said 20% of families that are poor and 25 crore people will benefit from the scheme. (File photo)

In a major announcement to woo voters ahead of the general election, Congress president Rahul Gandhi on Monday said 5 crore poor families will be given Rs 72,000 each a year as a minimum income if his party is voted to power. Terming the move as a “final assault” on poverty, Gandhi said 20% of families that are poor and 25 crore people will benefit from the scheme. While he didn’t share details of costs of the scheme, a simple calculation suggests it would be a massive Rs 3.6 lakh crore a year. Clearly, if not accompanied by dismantling of various existing subsidies and sops, such a scheme could upset the government’s fiscal consolidation goals.

Gandhi’s scheme approximates a quasi universal basic income (QUBI) scheme conceptualised by former chief economic adviser Arvind Subramanian, except for the fact that latter’s model, as explained in an article he recently wrote with three others, was specific to rural India. Subramanian envisaged transfer of Rs 1,500/month to households, covering 75% of the rural population at a cost of around Rs 2.6 lakh crore.

Gandhi hasn’t come out with measures to raise resources to be able to give the massive largesse, but he asserted that his party had studied the fiscal implications of the scheme and consulted experts before finalising it. As per the interim Budget, major subsidies (food, fertiliser and fuel) alone accounted for as much as Rs 2.66 lakh crore in 2018-19, up 39% from a year before.

According to a late 2016 ICE 360° survey that covered 61,000 households, the monthly per capita income of the bottom 20% of population was Rs 1,238. Assuming a family has five members, it would mean a monthly income of Rs 6,190.

With an eye on the election, the NDA government already announced in the interim Budget its plan to offer an annual Rs 6,000 cash support to small and marginal farmers under the PM-Kisan scheme, which would cost the exchequer Rs 20,000 crore this fiscal and Rs 75,000 crore in 2019-20.

Telangana’s reasonably successful Rythu Bandhu scheme is an existing model of income support scheme, under which farmers are given Rs 8,000 per acre/year (Odisha, West Bengal, Jharkhand also came out with similar, though less ambitious schemes).

On Rythu Bandhu, Subramanian wrote in FE a few months ago, “More generally, QUBIs (quasi universal basic income) are schemes in which transfers are given to everyone who meets an easily identifiable criterion….Rythu Bandhu has, however, one undesirable property as social policy…Because payments to households are based on farm size, they can become regressive (hence the pressures to exclude large farmers from the scheme). In contrast, a pure UBI in which the same rupee amount is given to all households will be progressive because the effective subsidy rate (transfers as a share of household income) will be greater for the poor and decline with rising income.”

Gandhi said the scheme was part of his party’s endeavour to ensure minimum income guarantee to every citizen. “The final assault on poverty has begun. We will wipe out poverty from the country,” Gandhi said in a conference. “5 crore of the poorest families in India, will receive Rs 72,000 Per Year. #NyayForIndia is our dream and our pledge. The time for change has come,” he later said on Twitter.

Gandhi announced the scheme after discussing it at the Congress Working Committee, which had met at the AICC headquarters here to give final shape to the party’s manifesto.

“This is a historic scheme which has not happened anywhere in the world. It is an extremely powerful, ground-breaking and well-thought through idea. We have consulted many economists on the scheme,” he said.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1BJP should emerge victorious, India needs PM Modi: Rajasthan governor Kalyan Singh
2Rahul Gandhi’s minimum income plan will be a one time shock for labour market, says economist Sunil Sinha
3Lok Sabha Elections 2019: Congress announces list of 26 candidates, Sanjay Nirupam to contest from North West Mumbai